move beyond spreadsheets for lease accounting - moving... · for the contract, maintain a new...

PUBLIC

Thomas Anderson, SAP

May 9, 2019

Move Beyond Spreadsheets for Lease Accounting(ASUG 84509)

Agenda1. The new lease accounting standards

2. Compliance – A great milestone

3. Optimize – Leveraging technology to continue compliance

4. Transform – Supporting on-going success

5. Transition options to SAP Contract and Lease Management

6. SAP Contract and Lease Management Road map

7. Summary

3PUBLIC© 2019 SAP SE or an SAP affiliate company. All rights reserved. ǀ

New Common Regulations for Contract and Lease Management The Leasing Event of a Generation – Driving Significant Change

▪ New standard on leasing released

by FASB and IASB

▪ Every IFRS/ US-GAAP reporting

company renting real estate or

leasing equipment will be impacted

▪ Large companies with big property

portfolio are affected most and

need to react quickly to prepare

▪ Besides affected accounting,

new standards will transform

corporate business processes

in many areas

▪ Lease Administrators and

Accountants must coordinate

efforts and operate without

business silos

▪ Need to capitalize most

operating leases and record these

lease obligations on the balance

sheet as assets and liabilities

▪ US GAAP requires classification of

leases of operating or finance lease

with different accounting treatments

▪ Short term and low value leases are

excluded from capitalization but must

be disclosed

IFRS

US-GAAP FUTURE

Accounting

Real Estate

Purchasing

PAST

OPERATING

LEASE

FINANCE

LEASE

Extensive Impact Capitalization of Leases Transformation of Processes


The Lease Accounting Adoption Journey

Comply

Transform

Optimize

To meet the needs of today’s Compliance Standards

To improve ROI and position for tomorrow

To drive innovation and agility to survive the

future







7. Summary


ComplyCompleting the tasks required for compliance

Comply

• Standardization

• Do what is needed to achieve/meet/demonstrate the guidance of the

regulations/GAAP

• Limited change to existing business processes and/or core technology systems

- minor adaptation where required

• Automation where convenient, not a focus (priority)

• Some to significant manual intervention anticipated to achieve/meet/demonstrate

• Limited integration due to time constraint and desire to minimize complexity


Spreadsheets are the most common compliance toolSimplicity lends itself to errors

Plimpton 322 Tablet - even the Babylonian’s made

copy/paste errors

But will that protect your organization today?


Lease accounting is more than just one time compliance

Update in

Valuations

Start Contract

Management

Payment

Adjustments

Term

Modifications

Compliance (Day 1)

• Calculate valuations for lease

• Create Right of Use Assets and Liabilities

• Post depreciation, interest and repayment of

liability

• Generate disclosure reports

Record to Report (Post Adoption)

• Manage lease modifications ensuring reassessments

are accurately reflected

• Manage lease renewals and early terminations,

eliminating potential for “evergreen” leases

• Manage CPI adjustments

• Support SOX compliance

• Multi-currency valuations

• Reclassification of short-term and long-term liabilities







7. Summary


Optimize

• Review existing processes/technologies and seek to improve using lessons learned

from implementation

• Little to some manual intervention - a focus on reducing manual workarounds and

interventions

• Increased automation with key external systems

• Use of data to look retrospectively and improve and optimize processes going forward to

include execution, visibility, transparency, controls, and role responsibilities

OptimizeReducing manual intervention using technology


SAP Contract and Lease ManagementNatively Integrated Leasing Solution with SAP S/4HANA Finance

Lease Portfolio

Lease

AdministrationReporting

Payment

Generation

Asset

Valuation

Lease Review

Asset

ClassificationReporting

SAP Contract and Lease Management

Contract

Management

Asset

Accounting

SAP S/4HANA Finance

Coordination between the Lease Administrator and Asset Account is critical for proper classification and

valuation. Sharing a common platform eliminates operational silos between these critical players.


Solution is part of SAP Finance –

enabling the transformation of your

leasing processes:

▪ Unified platform for lease

administrators and asset accountants

▪ Standardized leasing processes

▪ Real-time valuation of finance leases

▪ Elimination of financial interfaces

GENERAL LEDGER (MULTI-GAAP ACCOUNTING)

ACCOUNT PAYABLE/RECEIVEABLE

CONTROLLING & PROFIT CENTER ACCOUNTING

REPORTING


▪ Classification and valuation rules

▪ Calculate and report on net present value, depreciation, repayment and interest rate

▪ Lease Modification, Re-Assessments

▪ Statistical Valuation for non SAP Company Codes

▪ Support transition scenarios

▪ Create / Link to fixed assets

Valuation and Classification

▪ Different lease types for lease in and lease out

▪ Leasing partners

▪ Subject of agreement like cost center, property, WBS Elements, equipment, internal Orders, etc…

▪ Terms and conditions for notice and renewal options (validity)

▪ Lease payment cash flow with full integration

▪ Critical dates and reminders

▪ Document management

Contract Management

▪ Multi-GAAP enabling (IFRS, US GAAP, HGB)

▪ Manage right-of-use assets and liabilities

▪ Customer / Vender accounting

▪ Post depreciation and repayments

▪ Lease payments

▪ Controlling / Profit center accounting

Multi-GAAP Posting

SAP Contract and Lease ManagementLeveraging a Proven Solution Used by Customers Globally


SAP Lease Accounting TimelineSolution built on a proven platform

2016 20172004

June 28th, 2016

GA Leasing Solution

2004

GA SAP Lease Accounting with

generic contract management

October 30th, 2013

Advance correction for IFRS16

Simulations (note 1933458)

July 9th, 2018

ISAE Certification

Developed with four Innovation Customers in different

regions and with cooperation with global SAP Partners

2018

January & February

2016

Leasing standards

released


Change Events Impact Valuation Process


Payment change impact on valuation

Update in

Valuations

Start Contract

Management

Payment

Adjustments

Term

Modifications

Prior to modification

After modification


Automatic update of all financial calculations and postings


Term change impact on valuation

Update in

Valuations

Start Contract

Management

Payment

Adjustments

Term

Modifications

Addition of Probable End Date

After modification


Automatic update of all financial calculations and postings


Disclosure Slide







7. Summary


Transform

• Prioritize organizational needs – capabilities matrix/maturity profile/strategic

focus

• Greater use of standardized processes aligned to desired performance

• Understand and actively utilize “Compliance Lens” through repeatable use of

dashboards and analytics to improve insights and drive actions

• Maximum/Optimal integration among systems and processes

• Continuous management and improvement of data quality and management

as an enterprise asset

• Continuous close and constant insight into compliance

TransformStrategic focus on optimizing leasing processes


Portfolio Overview


Critical Dates Management


Analysis of Lease Valuations







7. Summary



Get ready for the new Standards

TRANSITION AND BUILD

Multi-GAAP

Posting

RUNPLAN

Start Contract Management

Initial

Valuate

Contracts

Perform

Abstracting

Implement

Change Management

ANALYSIS

PHASE

Contract

Management

Valuation and

Classification


For special transition cases – Please refer to OSS Note 2544232. Within this note, the following

scenarios are defined:

▪ Transferring Financial Leases that Existed Prior to Date of Application

▪ Retrospective Approach with Transfer of External Values

▪ Retrospective Approach Fully within SAP Real Estate Management

▪ Start of Date of Actual Application with Actual RoU Specification

▪ Implementation of RE-FX following first application of IFRS 16/US-GAAP 842

▪ Proforma Restatement

Special Transition Cases


Implementation of RE-FX following first application of IFRS 16/US-GAAP 842

Background

Use the asset transfer transaction to move the previous assets to a new Right of Use asset. Make sure

that the new assets have the correct depreciation key (SAP Note 2297363).

System Set Up

On the contract, do not use the "First Posting" function. Set the relevant date of application as the start of

valuation.


Implementation of RE-FX following first application of IFRS 16/US-GAAP 842

System Set Up

For the contract, maintain a new "Net Worth Val. Spec. Leg. Data" condition (see SAP Note 2536673) with

the net book value of the old right of use asset.

Manually assign the new Right of Use asset from step 1 to the valuation rule.

Manually write off the old leasing liability (for example, against asset clearing).



How to get started

Information Materials

Training Materials

Implementation Support

• SAP.com

• Overview note 2255555

• SAP help

• Partner JAM page

• SAP Training RE050

• Classroom

• Virtual Training

• SAP Press: Leasing with SAP RE-FX

• SAP Demo Cloud

• Demo 15341 - SAP S/4HANA Cloud REFX Equipment

Leasing IFRS16

• Demo 13721 - S/4HANA: Lease Valuation for New

Accounting Standards

• Delivered example customizing:

• 2403881 - BC set delivery customizing

• Consulting notes:

• 2580277 - Account determination

• 2544232 - Handling transition

scenarios

• 2568784 - Integration with FI-AA

• 2555105 - Explanation of calculations

• 2662137 – Frequently Asked Questions

https://www.sap.com/products/financial-management/real-estate-management.html

https://help.sap.com/doc/89dbf75305610114e10000000a174cb4/3.6/en-US/frameset.htm?bfdaf75305610114e10000000a174cb4.html

https://jam4.sapjam.com/groups/XU194KSFGDpYKjewVgVcCB/overview_page/iH7GQUI0rsVtH8mAqp6QzU

https://sapdemostore.com/sap/bc/ui5_ui5/sap/yunifiedstore/index.html#/scenario/15341

https://sapdemostore.com/sap/bc/ui5_ui5/sap/yunifiedstore/index.html#/scenario/13721







7. Summary


2H 2018 - Planned innovations 2H 2019 - Planned innovations1H 2019 - Planned innovations 2020 – Product vision

This is the current state of planning and may be changed by SAP at any time without notice.


Road map overview – in Detail

Valuation

▪ Support of valuation scenarios that

exclude depreciation

▪ Evaluation of new Standard

Comment Letters and customer

feedback

Valuation

▪ Lease Questionnaire

▪ Mass cancelation for valuation

process (status flag)



feedback

Valuation

▪ Improvements in handling multiple

foreign currencies within a single

contract

▪ Improvements in handling lease

impairments

▪ Reclassification for foreign

currencies and short/long term

liabilities as automated postings

Valuation

▪ Improvements in handling

subleases (Handling of Head Lease

adjustments)

▪ Functional improvements when

including non-deductible taxes



feedback

Reporting

▪ Balance report with periods

Reporting

▪ Weighted average interest rate and

term report

▪ Predefined leasing content for SAP

BW4 and SAC

Reporting

▪ Reconciliation report for clearing

accounts

▪ Additional functionalities for foreign

currency valuation

Reporting

▪ Summary Reporting Cockpit

User Experience

▪ Visual harmonization for classical

transactions

User Experience

▪ Additional apps/enhancements for

contract management and lease

valuation

User Experience

▪ Create and maintain functionality

within the Contract Management

App

User Experience

▪ Support of custom fields in the

Contract Management App

▪ Further improvements on the Lease

Valuation App

Note 2704567

Note 2685799

Note 2660070 & 2727558

Note 2617307







7. Summary



Enabling the transformation of lease accounting

▪ Automated Lease Processing

▪ Simplified Lease Modifications

▪ Ability to update and do Lease Buy Decisions

▪ Multi-jurisdictional capability to improve filings

▪ Ability to Balance Views Across Real Estate and Movables

▪ Integration to Sourcing Networks

▪ Integrated to SAP S/4

▪ Advanced Analytics via SAP Analytics Cloud

▪ Dashboards to Provide Real-time Insights for proactive management

▪ Allows for real-time What If analysis for Lease/Buy Decisions

▪ Integration With Treasury to Manage Capital Structure

Comply TransformOptimize

▪ ASC842/IFRS16 Compliance

▪ Built-In Basic Disclosures Sync’d with FASB

▪ Basic Support of PTP

▪ Integrated with ECC and S/4

▪ Integrated to ECC to provide strong audit trail to support ICFR

▪ SOX Compliance


Virtual Finance Summit (external)

Superior Steering with Intelligent Accounting and Financial Close

(Virtual Summit Christoph Ernst 13 min)

Automating Closing and Consolidation (Virtual Summit Elizabeth

Milne 14 min)

Start your Finance Transformation with Central Finance (Virtual

Summit David Ormerod 15 min)

Machine Learning in Finance (Virtual Summit Sebastian Schroetel 17

min)

Predictive Accounting (Virtual Summit Michel Haesendonckx 10 min)

Margin Analysis (Virtual Summit Michel Haesendonckx 19 min)

… and far more (customer testimonials, panels,

whitepapers,…)

Finance topics on YouTube and on the Virtual Finance Summit platform

Videos SAP Finance playlist on YouTube:

https://www.youtube.com/playlist?list=PL3ZRUb1AKkpTQscw2i-DjiEv0C-PTQINd

SAP Offering for Record-to-Report and FP&A in SAP S/4HANA

Why move to SAP S/4HANA for Accounting and FP&A: An extensive process view

Finance 1809 Overview:

https://youtu.be/CzPhDejuft8

Margin Analysis:

https://youtu.be/TfbthMsYcrc

Predictive Accounting:

https://youtu.be/yH-HJWeDyXA

Embedded Analytics:

https://youtu.be/wpakxWVEQv8

Accruals Management:

https://youtu.be/wEru-hqfj1w

Goods and Invoice Receipt Reconciliation:

https://youtu.be/jJXqWF1wJkw

Group Reporting:

https://youtu.be/mwn3O1rxd0I

Tax Service:

https://youtu.be/EEhIAJfQjXM

Treasury:

https://www.youtube.com/watch?v=cGQuSpdaBS8

https://events.sap.com/us/sap-finance-and-risk-management-virtual-event/en/home

https://event.on24.com/eventRegistration/console/EventConsoleApollo.jsp?simulive=y&eventid=1828954&sessionid=1&username=&partnerref=&format=fhaudio&mobile=false&flashsupportedmobiledevice=false&helpcenter=false&key=1DEED1133A47A14D4BD2B6087E2B6C23&text_language_id=en&playerwidth=1000&playerheight=650&overwritelobby=y&eventuserid=231872685&contenttype=A&mediametricsessionid=191300360&mediametricid=2575786&usercd=231872685&mode=launch

https://event.on24.com/eventRegistration/console/EventConsoleApollo.jsp?simulive=y&eventid=1889219&sessionid=1&username=&partnerref=&format=fhaudio&mobile=false&flashsupportedmobiledevice=false&helpcenter=false&key=8709711E439BE4EE6AD59520887B1338&text_language_id=en&playerwidth=1000&playerheight=650&overwritelobby=y&eventuserid=231872848&contenttype=A&mediametricsessionid=191300531&mediametricid=2660089&usercd=231872848&mode=launch

https://event.on24.com/eventRegistration/console/EventConsoleApollo.jsp?simulive=y&eventid=1828961&sessionid=1&username=&partnerref=&format=fhaudio&mobile=false&flashsupportedmobiledevice=false&helpcenter=false&key=64063DC7D1F1171DAF19F23E650029F2&text_language_id=en&playerwidth=1000&playerheight=650&overwritelobby=y&eventuserid=231872975&contenttype=A&mediametricsessionid=191300597&mediametricid=2575795&usercd=231872975&mode=launch

https://event.on24.com/eventRegistration/console/EventConsoleApollo.jsp?simulive=y&eventid=1828960&sessionid=1&username=&partnerref=&format=fhaudio&mobile=false&flashsupportedmobiledevice=false&helpcenter=false&key=CDD6077E14C648B612DB1ACDBD730D88&text_language_id=en&playerwidth=1000&playerheight=650&overwritelobby=y&eventuserid=231873023&contenttype=A&mediametricsessionid=191300668&mediametricid=2575794&usercd=231873023&mode=launch

https://event.on24.com/eventRegistration/console/EventConsoleApollo.jsp?simulive=y&eventid=1828944&sessionid=1&username=&partnerref=&format=fhaudio&mobile=false&flashsupportedmobiledevice=false&helpcenter=false&key=9B98F33F2E5FCD3DDC1765AE282794C5&text_language_id=en&playerwidth=1000&playerheight=650&overwritelobby=y&eventuserid=231873177&contenttype=A&mediametricsessionid=191300720&mediametricid=2575773&usercd=231873177&mode=launch

https://event.on24.com/eventRegistration/console/EventConsoleApollo.jsp?simulive=y&eventid=1828950&sessionid=1&username=&partnerref=&format=fhaudio&mobile=false&flashsupportedmobiledevice=false&helpcenter=false&key=45DABE65DD9EC228ABA561E9855A73D5&text_language_id=en&playerwidth=1000&playerheight=650&overwritelobby=y&eventuserid=231873247&contenttype=A&mediametricsessionid=191300758&mediametricid=2575781&usercd=231873247&mode=launch

https://www.youtube.com/playlist?list=PL3ZRUb1AKkpTQscw2i-DjiEv0C-PTQINd

https://www.youtube.com/watch?v=mWmiAsY8y4w&list=PL3ZRUb1AKkpTQscw2i-DjiEv0C-PTQINd&index=2&t=0s

https://youtu.be/CzPhDejuft8

https://youtu.be/TfbthMsYcrc

https://youtu.be/yH-HJWeDyXA

https://youtu.be/wpakxWVEQv8

https://youtu.be/wEru-hqfj1w

https://youtu.be/jJXqWF1wJkw

https://youtu.be/mwn3O1rxd0I

https://youtu.be/EEhIAJfQjXM

https://www.youtube.com/watch?v=cGQuSpdaBS8

Contact information:

Thomas Anderson

Director Real Estate Management

3410 Hillview Avenue, Palo Alto CA 94304

[email protected]

T: +1.650.461.1683

M: +1.801.425.6570

Thank you.

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